Accounting for Variability in the Growth Rate of Income

Lambert, Peter J.; Yitzhaki, Shlomo

doi:10.2139/ssrn.2472889

Accounting for Variability in the Growth Rate of Income

5 Pages Posted: 29 Jul 2014

See all articles by Peter J. Lambert

Peter J. Lambert

University of Oregon - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Shlomo Yitzhaki

Hebrew University of Jerusalem - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 24, 2014

Abstract

The average of periodic growth rates is a downwardly biased estimator of the rate of growth of a country. The higher the variance of the periodical growth rates, the higher the downward bias. The longer the business cycle, the higher the downward bias. In this short paper, we demonstrate these facts on a number of different levels, from intuitive to quite technical. We suggest that the variability of growth rates be taken into account whenever a long term forecast is prepared.

Keywords: growth rate, individual incomes, gross national product

JEL Classification: O47, B41, E37

Suggested Citation: Suggested Citation

Lambert, Peter J. and Yitzhaki, Shlomo, Accounting for Variability in the Growth Rate of Income (July 24, 2014). Available at SSRN: https://ssrn.com/abstract=2472889 or http://dx.doi.org/10.2139/ssrn.2472889